1.Introduction: the Failure of the Conventional Aid Model

The micro and macroeconomic impacts of development aid in Africa has become one of the most contentious issues for decades now. The recent path breaking book "Dead Aid" by Dambisa Moyo, an Oxford/Harvard economist, has shaken the foundation of the development aid model and stirred up the debate whether aid does in fact help to reduce poverty and increase economic growth in poor African countries. 

Moyo (2009) argues that although in the past fifty years Africa received more than $1 trillion in development related assistance from rich countries, poverty rates continue to escalate and growth rates have steadily declined. "Between 1970 and 1998, when aid flows to Africa were at their peak, poverty in Africa rose from 11% to a staggering 66%" and that " roughly 600 million of Africa's billion people are now trapped in poverty". Moyo would admit that aid has done some good on a local level, however, her conclusion is uncompromising: "Aid has been, and continues to be, an unmitigated political, economic and humanitarian disaster for most parts of the developing world - and Africa in particular´´( Edemariam, 2009). Moyo argues further that African countries that have rejected the development aid model have shown better economic performance than those who relied on aid and as a consequence remained trapped in a vicious circle of aid dependency, corruption, market distortion, and abject poverty.

It must be noted, however, that this author does not reject all forms of foreign assistances. She does not refer to humanitarian or emergency aid mobilized in response to natural disasters, nor does she refer to charity- based aid given to specific organizations and people on the ground. What Moyo rejects is "systemic aid", the vast sums regularly transferred from government to government, or via institutions such as the World Bank (Edemariam, 2009). She identifies two major reasons for aid failure in Africa, among other things, (a) lack of institutions: the capital injections by the IBRD and IMF and the Marshall Plan to post war Europe worked because they were limited in scope and Europe had institutions to make most out of them. Africa did not have such institutions. (2) Aid imperatives were not always altruistic: the primary objective of Aid to Africa during the cold war was to convert a country either to capitalism or communism. To this list one could add a host other non altruistic motives of aid including tying aid to businesses interests in donor countries, limited grant elements in the official development assistance (grant elements not substantially higher than 25%), and so on. 

Moyo proposes instead proposes solutions like new bond markets, microfinancing, revised property laws and increased trade. 

Moyo´s views on aid in Africa is shared by one of the leading African economic development experts, William Easterly. Easterly (2006) in his article "The West Can´t Save Africa-Locals must Take the Lead" argues " Economic development in Africa will depend -- as it has elsewhere and throughout the history of the modern world -- on the success of private-sector entrepreneurs, social entrepreneurs and African political reformers. It will not depend on the activities of patronizing, bureaucratic, unaccountable and poorly informed outsiders". 

He, however, admits that all Western aid efforts in Africa are not condemned to fail. He states that aid groups could search for achievable tasks with high potential for poor individuals to help themselves. "To do so, they would have to subject themselves to independent evaluation and be accountable to the intended beneficiaries for the results. Such an approach would contrast with the prevailing norm of never holding anyone individually accountable for the results of traditional government-to-government aid programs aimed at feeding the hubristic fantasies of outside transformation of whole societies." (Esterly, 2006). 

The preceding analysis indicates that the fundamental flaw of the development aid model in Africa is that the local people have limited or no role in the process. The aid funds therefore were wastage of resources. Even if a donor´s intention is to genuinely assist a poor country in its effort to reduce poverty and improve its economic growth , how does it make sure that the aid funds were used for the intended objectives. Aid fungibility and corruption have been the biggest problem in Africa and donors were fully aware of it. In spite of this, they continue to channel the so called bilateral and multilateral development aid funds to the central treasuries of the African governments. 

Development aid funds with substantial or full grant elements are just like other investment funds that can contribute to poverty alleviation, economic growth and development if properly utilized. The problem is both the donors and central governments in many African countries were not concerned about poverty alleviation and economic growth in spite of paying leap services to it for over half a century. 

If the donors were concerned about poverty alleviation and economic development in Africa the first thing they should have done was to go to the people on the ground, listen to these people and discuss their problems and together with them identify top development priorities and projects in the area and directly invest on them. This is not a rocket science for donors in developed countries. No company in developed country makes an investment decision without conducting feasibility study, even for a couple of hundred thousand dollars. Why did developed countries provide over a $1 trillion development aid to Africa without conducting any feasibility studies? Let us not fool ourselves. Talking about saving Africa is a leap service both by donors and corrupt African leaders. 

One such genuine development attempt was made by Ireland Aid in Sidama province of Ethiopia between April 1994 and March 2002. I was part of the initial consultation process during the feasibility study and what I narrate below is what I have personally witnessed between April/ May 1994 and March 2002, both as the first coordinator of the Ireland Aid –Sidama Development Programme for the period May 1994 –July 1998 and later as the managing director of a local non-governmental organization, the Sidama Development Corporation for the period August 1998 – March 2002. This organization was also partly funded by Ireland Aid. I will narrate about it in part II of this article.